Lloyds Banking Group is to sell TSB, with 25% of the former Trustee Savings Bank to be floated at the end of June. The rest will be sold to investors in several stages over the next12 months. The sale is a condition of the £20bn bailout of Lloyds in 2008.
TSB has a relatively large branch network, with 631 outlets, and accounts for 4.2% of current accounts. Lloyds has 2,265 branches and 25% of current accounts.
It will not be exposed to mis-selling scandals, because Lloyds will cover the cost of any that may emerge, while it also has a strong capital position. This makes it "unique" according to chief executive Peter Pender, said The Daily Telegraph: "a fully functioning retail bank with no legacy issues to worry about".
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TSB also points to its growth potential: it has branches across the UK, giving it a reach matched only by Nationwide and Santander, and hopes to bolster lending by 50% in the next three years. But this won't be easy, said The Independent'sJim Armitage.
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Take Metro Bank in London. Four years after its launch it still has only 300,000 customers. If it's this hard to "prise people away from the big banks" in a city of eight million, how much tougher will it be for TSB in the rest of the country?
Branches are expensive to run and low interest rates will also dent profit margins. Nor is there a dividend to look forward to until 2018 either. "Jam tomorrow, then and we're not sure how much."
The listing also comes "at the fag-end of a flotation season" replete with "overpriced and overhyped" firms, as James Ashton pointed out in the Evening Standard. Only one company that floated this year is up on its initial public offering (IPO) price. Don't expect stellar returns.
